EUR/USD: Trading the US Unemployment Claims Apr 2015

US Unemployment Claims is released weekly, and measures the number of people filing for unemployment for the first time. It is considered an important measure of the health and direction of the US economy. A reading which is higher than the market forecast is bullish for the euro.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Thursday at 13:30 GMT.

Indicator Background

Analysts closely monitor employment data, and Unemployment Claims provides them the opportunity to track the US employment picture on a weekly basis.  The labor market  is highly correlated with economic growth, so an unexpected reading can have a significant impact on the movement of EUR/USD.

Unemployment Claims is on a downward trend,  and the indicator dropped to 268 thousand last week, well below the estimate of 286 thousand.  However, the markets are  braced for a strong jump in the upcoming reading,  with the estimate standing at 283 thousand. Will the indicator again surprise the markets and beat the prediction?

Sentiments and levels

EUR/USD remains in correction mode and  appears to have found a range to trade in: between 1.0710 and 1.1050. While the  greenback  has been less attractive recently, the euro is not an attractive alternative.  Economic data has improved slightly in the Eurozone, but the economy remains  fragile. Draghi and co. will continue printing money to give the  economy a  stronger footing, but the road to recovery will be a bumpy one.  So, the overall sentiment is  neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.12, 1.1050, 1.0910, 1.0760, 1.0615  and  1.0550.

5 Scenarios

1. Within expectations: 279K to 287K: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 288K to 292K: An unexpected  higher reading can send the pair  above one resistance line.
3. Well above  expectations:  Above 293K:  A sharp increase in  unemployment claims  would be bearish for the dollar. Two or more  resistance lines  could be broken on such an outcome.
4. Below expectations: 274K to 278K: A positive reading could push EUR/USD lower, and one  support  line could be broken.
5. Well below expectations: Below  274K. A  sharp decrease  in unemployment claims could  see the pair break below  two or more support levels.

For more on the Euro, see the EUR/USD forecast.

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